Benzinga - by Zaheer Anwari, Benzinga Contributor.
- Gold has demonstrated a remarkable recovery recently, rebounding by $60.
- The commodity hit a critical juncture on September 20th when it dipped by almost 7%.
- Contrary to gold's ascent, the US dollar is experiencing a downturn, declining by 1.4% from its recent peak, highlighting the inverse relationship between the two assets.
This resurgence is particularly significant, especially when considering the bleak performance witnessed until the end of last week.
On September 20th, a significant turning point unfolded for gold. The commodity experienced a notable decline of nearly 7%, causing concern among market observers.
Interestingly, gold discovered a lifeline at the weekly 200 simple moving average, which served as a critical support level.
This pivotal point triggered a sudden reversal in its fortunes.
When trying to grasp the full extent of these fluctuations, one must take a broader perspective on gold's performance.
Since August 2020, its price has been locked within a wide consolidation zone, with prices fluctuating between $1614 and $2075.
This range has proven resilient, confining gold to a cycle of volatility characterized by sudden and unpredictable swings reminiscent of the recently observed one.
The current upturn holds significant implications. If the price continues moving with its current momentum, it could potentially surge towards the upper echelon of the consolidation zone, where a resistance level of $2075 awaits.
However, for gold to regain its allure among investors, a breakthrough of significant magnitude is necessary.
Not only must it overcome this resistance, but it must also surpass its previous peak, leading to a period of continuous upward momentum.
This scenario is certainly plausible and well within the realm of possibility.
A decisive breakout could set the stage for a pattern of 'higher highs and higher lows'.
The question now is whether gold will embark on an ascendant trajectory that spans several years.
Gold is undergoing a fascinating upward surge, while the trajectory of the US dollar is diverging, with a decline of 1.4% from its recent peak of $107. This trend indicates that investors are increasingly drawn to this secure haven as they pour their funds into this valuable commodity.
After the closing bell on Wednesday, October 11, the commodity closed at $1874.13, trading up by 0.70%.
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